With the birth of my first child in late May, I’ve taken some time off to help out at home, spend time with my wife and daughter, and this has given me ample time to reflect on our company’s growth and prospects.
There is a God, and He Loves Soccer
As luck would have it, the paternity leave coincides with Euro 2008, so I’ve been able to catch the games on TV in between diapers, calls, burping and emails. I love it.
Incidentally, four years ago marked Euro 2004, and it was then that IGN’s VP of Corporate Development Richard Jalichandra (current CEO at Technorati) reached out to my old company AskMen and initiated acquisition talks.
Eleven months later, AskMen became a subsidiary of IGN Entertainment. In four years, my partners and I sold AskMen (May 2005), I resigned/got pushed out, began to tinker with search technology, devised a few applications, officially founded Mojo Supreme (2006), started WatchMojo.com and began to blog profusely on HipMojo.com (and other blogs, too).
There Will Always Be Something to Worry About
Shortly thereafter, as some readers know, IGN sued me alleging that I was violating my non-competition agreement. The actual trial took but a week, but the overall process took nearly a year.
Throughout all of 2006, what kept me up at night was “are we going to be shut down?“ IGN was seeking an injunction to do just that. I knew we would not be shut down, but I was not sure of it. It took time to be vindicated. But ultimately, things fell in their place and that dark cloud passed on by.
Having invested my own money to launch the company, the legal liability resulting out of the lawsuit naturally hindered my ability to raise outside money. I’ll be honest and say that I don’t think I was realistic in assessing the challenges of raising money as a content play. Sure, a couple of content companies have raised boatloads of cash, but ultimately that is starting to turn into their Achilles Heel as they get crushed underneath the weight of heightened expectations and crazy burn rates.
Throughout 2007, my fear was no longer “are we going to be shut down?” but rather “are we going to run out of money?“ We were consistently being hit up by media companies looking to potentially invest or buy us, but as they were all trying to grasp what was going on in video, none of them was ready to move from interest to intent - let alone action (FYI - upcoming post: M&A - Separating Intent from Interest and Turning It Into Action).
As a result, throughout 2007, I met with about 10 venture capital groups:
- the majority were really not a fit: I knew it, they knew it, and the American people knew it.
- a couple were a really good fit, but they went on to invest in our competitors. Thanks!
Ultimately, with one group, things got close. But they passed in late December because they “were just not ready to do content deals yet” and because in their words, we “didn’t have a team”.
Why I Never Raised a Penny in External Financing
Maybe what they said is 100% true, but I think the single biggest reason why I never rose any institutional money is because I was not born yesterday and understood a thing or two about financing and deal structures. Ignorance is bliss, but only the paranoid survive.
The vast majority of clauses that VCs ask for and get away with are draconian. If you are a clueless technologist or a hapless creative sap and agree to these, seriously, more power to you, as you have other people’s money to play with.
I am the idealistic sap who is naive and innocent enough to think that some of those clauses push the boundaries of fairness and ethics, so it would become clear to VCs - whose main objective is to maximize their share of the company in exchange for as little amount of resources - that they would not really be able to dictate terms to me or take advantage of me after the deal was signed.
I probably won’t make any friends in the VC community by saying that, but let’s face it, I don’t have any friends in the VC community.
If a term sheet isn’t worth the paper it’s written on (and you won’t even use it to wipe yourself with), then don’t accept the deal simply for the vanity of saying you’ve raised VC money.
VCs are not your friends. They are your counterparts.
Sure, you share a common goal (maximizing value) but their objective is constrained by your control and your share of the company. They can maximize by eliminating you, which they can do, you cannot remove them.
But getting back to my story, after getting that response from said VC about me not having a team, I got pissed off. I don’t have anything personal against them to this day… in fact, what they said just challenged me more, as such setbacks and haters always have.
I got pissed because WatchMojo.com is now arguably one of the most valuable video content plays out there, and truth be told, the credit goes to everyone, including me to some extent, but also to my team, considerably: I’ve never shot or edited a single frame, yet “frame for frame”, we have a more valuable business than half of the crap out there. By crap I am not referring only to UGCrap, but also what is being passed off as premium stuff, too.
The point is: a lot of companies in the content space fail because they try to please VCs.
Candor Leads to Challenge
Upon hearing that feedback from the VC, I went back to my team and told them that our best candidate for funding had given me the one finger salute and basically told them (my team) that they were useless and non-existent.
I also told my team that I thought of withholding that comment from them, but that in the end I wanted to challenge them to go out there and show those MMQBs that we did have a team, our team could win and that we would in fact wipe the floor with the competition.
I concluded by saying that it was up to them - not me - to make the VC be right or proven wrong.
2008: The Fruits of Your Labor
Six months later, I don’t really worry about running out of money, it’s sort of impossible because every day that goes by, we have some new business that creeps up. Sure, there are lots of costs involved with running a content play. But so long as you don’t have VCs to worry about, you can actually build a valuable business with a nice library, impressive distribution, a client list and sit down folks: growing revenues!
So now, in 2008, while I still worry about some things, mainly, I worry about cash flow. But instead of waiting for the VCs to get on side, I just have to push that distraction aside and focus on the company’s core operations and turn over more stones to boost revenues… which is what made me a very successful executive at AskMen anyway.
This Too Shall Pass
If I had to compare what keeps me up at night in 2008 with what kept me up at night in 2006 (lawsuit) or 2007 (running out of cash), I will take this year’s worry anytime. In fact, truth be told, thanks to the birth of my little girl, that’s not what keeps me up at night, anyway.
Business is good, life is great.
The best part is: ironically, because we never raised external funding, we have more options available to us than I could have ever imagined:
- Merger talks,
- Acquisition interest,
- Funding offers…
- and unexpectedly: the status quo.
Stay tuned folks… the 2008 tournament just got started.
Digg this Blog
Share on Facebook
WatchMojo on Twitter
WatchMojo on YouTube
Add to Favorites
WatchMojo Newsletter
PLAY
